Agents Have Opportunity To Dominate

Insurance consumers have spoken, and theyre choosing independent agents loud and clear.

Some well-quoted “industry observers” didnt believe in independent agents. The Internet was supposed to replace agents. Wrapped up in pretty surveys and research, all that jabber from experts, consumer advocates, dot-coms, critics and pundits was just that–chatter and babble. One Web sites slogan was, “The Industry is History.” (Guess whos history now?)

Look at the facts: Independent agents are clearly the best way to market insurance to the public. Theyre the true consumer advocates and have the resources to match the right coverage to the clients circumstances, period.

And the best news is that independent agents right now have an excellent, history-making opportunity to expand even more. Why? The environment!

Lets look at the environment in which agents are working.

The property-casualty insurance industry is a mess. The market isnt merely hard–its cement. Even before Sept. 11, the U.S. p-c industry in 2001 was headed for a 112 combined ratio; it wound up at 116. And the projection for 2002 isnt much better.

As if the aftershocks of Sept. 11 werent bad enough, our industry now faces even more challenges, such as:

A lack of confidence in big business (look at WorldCom, Enron, Tyco, etc).

A depressed, and depressing, stock market.

Asbestos and mold claims.

Rising medical inflation.

A multitude of major industry lines that are estimated to be under-reserved.

Just plain lousy underwriting in the 1990s that has led to significant carrier balance-sheet issues.

It is, indeed, the “perfect storm” for the p-c industry, but independent agents are the safe harbor as trusted, professional advisors.

In this chaotic environment, consumers will choose independent agents, because only agents offer choice, personal service, and expertise. They represent more than 45,000 points of sale around the country. They know their carriers well. They focus on satisfying the customer, not the company.

Their channel competes on expenses with other so-called “low-cost” alternatives. And independent agents already have leverage, as they control more than 90 percent of commercial lines and a third of personal lines.

As a new CEO, Ive been traveling and meeting with many of our agent customers. Ive noticed some common strengths among particularly successful organizations. Here are some observations about those agencies:

Leadership: Any business, small or large, needs professional leadership, setting strategic direction. This gets all employees aligned, engaged and excited about where the organization is going. Employees need to see where they fit into the organization's future.

For many agents, this is a difficult area because by nature theyre very tactically focused. Theyre the great marketer and salesperson in the agency. While thats important, successful agencies are strategically focused as well.

Agency work is hectic; everybody is living in the moment, solving client issues. But a leader must take a long-term view.

It certainly is difficult to master all the skills necessary to effectively manage the agency on a day-to-day basis, much less think about the three-to-five year plan. Thats what it takes, however, to be the best. I challenge agency owners to take advantage of the support offered by trade associations in this area.

Agents can review material provided in the “Best Practices” program offered by the Independent Insurance Agents and Brokers of America, or the “Value Difference” program from the National Association of Professional Insurance Agents, both based in Alexandria, Va.

Technology: A great technology strategy is an agency owners key to efficiency gains. Leveraging automation by creating effective processes is the enabler. This will allow an agency to deliver on its vision, drive cost out, and recreate or modify the infrastructure where its delivering value for the organization rather than simply delivering paper.

For example, technology means independent agents can provide 24/7 service, leveling the playing field with captive and direct writing competitors. In addition, by taking advantage of online functionality, agents can streamline paperwork and eliminate redundant tasks. This allows more time for CSRs to focus on providing more value to their customers through creative problem solving and consultative services.

Bottom line, agents need to insist that their carriers get out of the way, and design systems that make the carrier “invisible” and the agency “visible” in the transaction process.

Successful agents develop and implement a strategy around continually and proactively updating hardware and software. Unfortunately, many agents are simply reacting to the need to update.

Agents can learn more about technology as a strategy by visiting IIABAs Web site (www.independentagent.com), and reviewing pieces provided by the Agents Council for Technology.

Brand Management: Brand is the most valuable asset any business has to manage. Brand touches everything the organization does, from signage and awnings to the quality of the employees, to the way the telephone is answered.

Brand is the relationship customers have with the agency. With a strong brand, customers will never leave–theyll stay in times of controversy (such as when premiums are rising), theyll refer the agency to others, and theyll be more likely to buy more products.

Smart agency owners manage their brand well. They talk constantly with their customers and employees about performance–uncovering what their customers value, and why they value those factors. They align all their marketing and advertising around consistent messages. They are proud of their employees, showing them off in marketing materials. Brand should be leveraged as a competitive differentiation.

I strongly encourage agents to join “Trusted Choice,” IIABAs consumer-marketing brand. Our company is a founding member of Trusted Choice because we know the power and the opportunity of the independent agency distribution channel. Trusted Choice will make a significant contribution to increasing agent market share.

Consumers want choice, competitive prices, comprehensive products, advocacy at the time of a claim, and some services after hours. Independent agents offer exactly those things, but consumers dont realize it.

Why should our distribution channel remain the best-kept secret in insurance? Trusted Choice agents are part of a national franchise with advertising and public relations designed to drive qualified new customers to their Web site with a consumer-tested brand name, logo and tagline.

Great Strategic Partners: Independent agents are strong, but only as strong as their carrier partners, so they should choose prudently.

What should they look for in a company? A good balance sheet; consistency, stability, and a sense of focus about the market; underwriters who know what theyre doing; and a company that supports the independent agent, not the agents competition.

I think many agents have forgotten the importance of this latter point. Independent agents should choose carriers that treat the agent as the customer–for example, investing in technology to support agents rather than compete with them. If theyre going to play in our distribution channel, carriers should position the independent agent, not the carrier itself, to sell any way the customer wants to buy. Thats true commitment.

Agents should beware of fair-weather friends. Multi-distribution companies arent solely committed to independent agents success. They justify their actions by saying theyre “offering the consumer choices,” but theyre taking profits derived from agents and redirecting them into distribution systems that compete with agents.

Its really no surprise that regional independent agency carriers in recent years have been the fastest-growing distribution channel in homeowners and commercial lines, and the second-fastest channel behind direct response in private-passenger auto. Why? Regional carriers call the independent agent the customer. They compete effectively in expense management, know the market, and dont compete against their agents.

Agents also should align with carriers supporting the IIABA and PIA. These organizations have created important partnerships with companies to help agents run more successful practices, understand technology, attract and keep great employees, and fight for insurance legislation and regulation thats good for the consumer and fair for our industry.

Creating a Great Place to Work: People are disillusioned about working at large firms, and thus many young people coming out of school are attracted to relatively smaller outfits and the chance to one day own a piece of the business.

An independent agency ought to be the place to work in the community. Successful agents I meet understand this, and have plans in place to be the employer of choice. For example, they engage employees in decisions that affect their work, create flextime or work-from-home programs for some employees, and commit to ongoing education to assist employees in gaining new skills.

Agents can run a business that provides a professional yet light, fun and rewarding environment, where everyone has the chance to excel.

An agencys staff should focus on improving customer service every day. Owners should embrace good ideas from employees, and share information with them so they know where they stand. Owners should thank the staff for their work, celebrate success, allow everyone a chance to deliver on the brand promise and vision, and be proud of the franchise.

Any business can always use a shot in the arm. New blood is important. Agents looking to hire excellent new talent should check out InVEST, which educates high school and community college students about insurance and risk management. Most students go on to work at agencies or carriers. Agents can even start a class in their area. (For information, check www.InVESTprogram.org.)

What a great time to be an independent agent! The future couldnt be brighter for staring down cranky old critics, crushing the competition, and surfing an awesome wave in a tumultuous insurance storm. Independent agents are very well positioned to grow market share. Consumers want choice, expertise and advocacy–only independent agents can deliver. Lets grab the opportunity!

Tom Van Berkel is CEO of Main Street America Group in Keene, N.H., a holding company for independent agency carriers National Grange Mutual Insurance and Old Dominion Insurance, which collectively write more than $600 million in premium exclusively through independent agents. He can be reached at vanberkt@msagroup.com.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 23, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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